Leadership

Taming Complexity in Your Professional Services Business

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For enterprise software companies, professional services is a critical function. After all, this is the organization tasked with getting customers live. It is also one of the most challenging areas of the business — resource intensive and slow to build, under constant margin pressure (or in the early stages a loss-leader) and often lacking in tools that are key to its success. Given professional services’ smaller percent of revenue contribution, it can be tempting to under-invest in automation tools and processes. But when your software or SaaS company undergoes periods of hyper growth, expands into new geographies or launches new product lines, you need one of your most scarce resources — your professional services organization — at the top of their game. 

The professional services climate for tech companies continues to recover but has yet to bounce back to pre-recession levels. Over the past year, attrition rates jumped from 7.2 to 8.3 percent and utilization rates are still hovering just below 70 percent. Revenue growth has declined for a second straight year, and the result is lower revenue per billable resource plus higher overheads, which combine to squeeze profitability.  

The keys to success in professional services remain constant:

  • Assign the right resource
  • Effectively track consultant time and expense
  • Ensure project execution stays on track
  • Bill your customers and recognize revenue appropriately 

When you are a startup, you can track these areas manually; you probably only have a few consultants and they are most likely all located in the same country. But as always the key to moving from a successful startup to a mid-market player to a company on the cusp of going public is the ability to scale.  

Five tactics to tame the hyper-growth company’s professional services organization 

Managing complexity in a fast-growing services business is a challenge but one that offers great opportunities. As the organization expands it must be adept at:

  • Understanding utilization with differing work schedules
  • Slicing profitability across industry groups, offices, practices areas and clients
  • Managerial reporting versus financial reporting
  • Multi-currency invoicing, collections and payables
  • Inter-company transactions across legal subsidiaries
  • Multi-subsidiary accounting with localized taxation and statutory reporting requirements

While all of this might seem overwhelming, the good news is professional services automation tools (PSA) can provide the foundation for success. In addition, focusing on these five key areas will help your team overcome the complexities of the rapidly growing, global services organization. 

1.  Establish project management excellence

Nothing will derail your growth plans faster than average (or worse) execution in the table stakes areas of project management. Solid project management built on classic PMP (project management professional) themes is, of course, critical for success. The successful organization will have real-time access to planned versus actuals, project burn rates, current and projected project profitability, as well as earned-value metrics. If you haven’t taken the time to lay a strong foundation in the basics of project management, your dreams of achieving an effective global services organization are unlikely to come true. 

2.  Invest in resource management tools

Resource management allows you to put the right person on the right project at the right time, and with skills tracking you will have a deeper level of insight into your resources. In your team of 200 consultants, who is a Java expert? Who speaks Spanish? Who has a visa enabling her to work in India? 

Utilization reporting helps you manage these resources: Who is on the bench and available for work today? When do Mary and Juan roll off of their current competitive assessment project? What was the utilization of our QA team last year? These are the operational questions that drive billable services organizations — maximizing the billable hours of your consultants and keeping your high-priced resources off the bench. 

3.  Embrace project accounting 

Project accounting allows you to understand how to better monetize your services work through billing/invoicing processes, proper revenue recognition treatment and profitability reporting. As your services business grows, finance and other back-office activities can become time consuming. However, through project accounting you have insights into which parts of your operations are profitable and which ones are hurting your bottom line. So the work here really pays dividends. 

4.  Break down the silos

Working efficiently across the organization to achieve business goals should be a key focus for you. This means establishing strong relationships with your marketing, sales, finance and customer service organizations. Think of each function being one piece to the puzzle to unlocking growth.  And while the professional services team plays the critical role in meeting your customer’s needs, the finance and customer service teams are the other key players in ensuring customers remain satisfied.  Are customers being billed accurately? Does your customer service team have a 360-degree view of the customers they are dealing with? Breaking down the traditional silos and instilling real-time visibility across the business is a hallmark of best-in-class services organizations. 

5.  Plan now for future growth

As your business grows in size and complexity, technology can give you the edge to succeed. Managing projects and resources using the tools you started out with won’t help you scale. The financial concerns facing a rapidly growing services organization can be a drag on efficiency, especially if your finance team is spending time rekeying data, manually creating transactions, and then going through a massive reconciliation exercise each month or quarter to close the books. The breadth and depth of technology tools available to services organizations has never been stronger, and an investment in this area is an investment in your services organization’s future. 

You’ve worked hard to grow your business to a certain level, and with that growth complexity is inevitable. Know that many have prevailed in the face of these challenges. The five keys outlined above, with the help of professional services automation (PSA) tools can help keep you and your organization’s growth on track.

Kimberly Odom is director of vertical marketing – software industry at NetSuite. She has 15+ years’ experience in enterprise applications including ERP, CRM, multichannel customer service and marketing automation. Prior to NetSuite she worked at Contactual, a SaaS provider of customer interaction management solutions, where she was responsible for development and execution of the company’s marketing strategy. Her background includes roles in product marketing, product management and channel sales with startup, midmarket and Fortune 500 companies.  

 

 

 

 

 

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